Tecnoglass Reports Strong Growth, Record $431 Million In 2019 Revenues

Tecnoglass, Inc. (NASDAQ: TGLS), the largest Colombian manufacturer of architectural glass, windows, and associated aluminum products for the global commercial and residential construction industries, this week reported financial results for the fourth quarter and full year ended December 31, 2019.

José Manuel Daes, Chief Executive Officer of Tecnoglass, (above right) commented, “2019 was another transformative year for Tecnoglass, in which we achieved record total revenues, gross profit, adjusted EBITDA¹ and backlog. Additionally, we effectively managed our inventory and working capital, contributing to further balance sheet improvement and robust cash flow generation into year end. We were especially pleased to deliver positive free cash flow during a year where we invested a considerable amount of capital towards completing several high return projects that will further enhance the strength of our vertically integrated operations over the long-term. We believe these collective actions, combined with the simplification of our dividend to a cash-only policy, have significantly improved our alignment with shareholders, underpinning our commitment to meaningful value creation as we outpace market growth and gain share. Into 2020, we remain optimistic about our project pipeline and the strength of our industry-leading margin business,” said CEO José Manuel Daes.

Fourth Quarter 2019 Highlights                                                                                             

• Total revenues of $101.4 million, with approximately $5 million of commercial projects deferred into 2020
• Net income of $10.6 million, or $0.23 per diluted share, including non-cash FX gains during the period
• Adjusted net income of $7.5 million, or $0.16 per diluted share
• Adjusted EBITDA of $21.5 million
• Generated $19.2 million in cash flow from operations
• Completed the implementation of all high-return automation projects

Christian Daes, Chief Operating Officer of Tecnoglass (above, left), added: “Backlog grew each quarter on a sequential basis through 2019, primarily in the U.S, leaving us on firm footing at year end. Our focused efforts to add new customers, enter new markets and provide best-in-class service drove a 24% full year sales increase in the U.S., representing 85% of our total revenues compared to 80% in 2018. Full year single-family residential sales increased by 78%, surpassing our expectations. At the same time, during the fourth quarter higher costs for aluminum and U.S. labor adversely impacted gross profit. In addition, some customers experienced their own labor constraints, resulting in an estimated $5 million of delayed commercial projects into 2020. We anticipate the efficiency savings from our timely completion of automation initiatives, among other actions, will help mitigate higher labor costs and allow us to accomplish our objectives in the year ahead.”

Fourth Quarter 2019 Results

Total revenues for the fourth quarter of 2019 improved 3.6% to $101.4 million compared to $97.9 million in the prior year quarter. Excluding the impact of unfavorable foreign currency exchange, total revenues increased 4.7% compared to the prior year quarter, with growth in the U.S. and Colombia. U.S. revenues increased 2.9% to $83.8 million compared to $81.5 million in the prior year quarter, primarily driven by stronger residential invoicing partly offset by delayed starts on key commercial projects, representing an estimated $5.0 million of deferred invoicing. The delays were mainly attributable to labor constraints experienced by customers amid overall robust commercial construction activity. Colombia revenues of $14.1 million increased 9.2% as reported and 17.4% excluding foreign currency compared to the prior year quarter, primarily attributable to stronger project activity.

Tecnoglass’ tailored, high‐end products are found on some of the world’s most distinctive properties, including the El Dorado Airport (Bogota), 50 United Nations Plaza (New York), Trump Plaza (Panama), Icon Bay (Miami), and Salesforce Tower (San Francisco).

Gross profit for the fourth quarter of 2019 was $29.3 million, representing a 28.9% gross margin compared to gross profit of $34.1 million, representing a 34.9% gross margin in the prior year quarter. The lower gross margin was mainly attributable to higher U.S. labor costs, particularly on installation revenues and subcontracting costs, as well as modestly higher aluminum costs per unit. Gross margin in fourth quarter 2019 also included approximately $1.5 million of non-recurring costs to finalize the implementation, testing and start-up of the company’s high return automation projects at its production facilities.

Net income was $10.6 million, or $0.23 per diluted share in the fourth quarter of 2019 compared to a net loss of $4.4 million, or a $0.12 loss per diluted share in the prior year quarter, including non-cash foreign exchange transaction gains in the fourth quarter 2019 and losses in the fourth quarter 2018 related to the re-measurement of USD denominated assets and liabilities against the Colombian Peso as functional currency. Adjusted net income was $7.5 million, or $0.16 per diluted share compared to adjusted net income of $10.2 million, or $0.25 per diluted share in the prior year quarter. Adjusted net income, as reconciled in the table below, excludes the impact of non-cash foreign exchange transaction gains or losses and other non-core items, along with the tax impact of adjustments at statutory rates, to better reflect core financial performance.

Adjusted EBITDA was $21.5 million, or 21.2% of sales compared to $21.5 million, or 22.0% of sales, in the prior year quarter. Adjusted EBITDA in the fourth quarter 2019 included $1.1 million in contribution from the company’s joint venture with Saint-Gobain.

Full Year 2019 Results

Total revenues for the full year 2019 increased 16.2% to $430.9 million compared to $371.0 million in the prior year. Excluding the impact of unfavorable foreign currency exchange, total revenues increased 17.7% compared to the prior year.

Gross profit increased 13.0% year-over-year to a full year record of $135.8 million, representing a 31.5% gross margin, compared to $120.2 million, representing a 32.4% gross margin in the prior year. Operating income was $58.8 million compared to $47.2 million in the prior year. Net income was $24.3 million, or a $0.55 per diluted share, compared to net income of $8.5 million, or $0.22 per diluted share in the prior year. Adjusted net income¹ was $30.8 million, or $0.69 per diluted share, compared to $32.3 million, or $0.82 per diluted share in the prior year. Adjusted EBITDA¹ for the full year 2019 improved to a record $92.4 million, or 21.4% of sales, compared to $80.8 million, or 21.8% of sales, in the prior year.

The company ended 2019 with cash and cash equivalents of $47.9 million compared to $33.0 million in the prior year. Cash provided by operating activities of $26.7 million, improved by $31.8 million compared to the prior year, attributable to more efficient inventory and working capital management into year end. During 2019 the company incurred $25.0 million of cash capital expenditures, compared to $13.1 million in the prior year, with the increase due to the company’s $20 million investment into recently completed high-return projects to expand and automate key operations at several glass and aluminum facilities.

Dividend

On March 2, 2020, the company’s Board of Directors declared a quarterly cash dividend of $0.0275 per share, or $0.11 per share on an annualized basis, payable on April 30, 2020 to shareholders of record as of the close of business on March 31, 2020.

Full Year 2020 Outlook

For the full year 2020, the company expects to see growth in construction end markets and additional market share gains in the U.S. In 2020, the company anticipates revenues to grow to a range of $445 to $455 million. The company anticipates Adjusted EBITDA in 2020 to be in the range of $97 million to $102 million, representing growth of 7.7% at the midpoint year-over-year, driven by higher revenues and the flow through of high return investments, partly offset by higher labor costs.

Tecnoglass Inc. and Subsidiaries
Consolidated Balance Sheets
 (In thousands, except share and per share data)
(Unaudited)

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income
 (In thousands, except share and per share data)
(Unaudited)

Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Cash Flows
 (In thousands)
(Unaudited)

Revenues by Region
(Amounts in thousands)
(Unaudited)

Reconciliation of Non-GAAP Performance Measures to GAAP Performance Measures
(In thousands)
(Unaudited)

The Company believes that total revenues with foreign currency held neutral non-GAAP performance measures, which management uses in managing and evaluating the Company’s business, may provide users of the Company’s financial information with additional meaningful bases for comparing the Company’s current results and results in a prior period, as these measures reflect factors that are unique to one period relative to the comparable period. However, these non‑GAAP performance measures should be viewed in addition to, and not as an alternative for, the Company’s reported results under accounting principles generally accepted in the United States.

Currency impacts on total revenues for the current quarter have been derived by translating current quarter revenues at the prevailing average foreign currency rates during the prior year quarter, as applicable.

Reconciliation of Adjusted EBITDA and Adjusted net (loss) income to net (loss) income
(In thousands, except share and per share data)
(Unaudited)

Adjusted EBITDA and adjusted net (loss) income are not measures of financial performance under generally accepted accounting principles (“GAAP”). Management believes Adjusted EBITDA and adjusted net (loss) income, in addition to operating profit, net (loss) income and other GAAP measures, is useful to investors to evaluate the Company’s results because it excludes certain items that are not directly related to the Company’s core operating performance. Investors should recognize that Adjusted EBITDA and adjusted net (loss) income might not be comparable to similarly-titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance prepared in accordance with GAAP.

Reconciliations of the non-GAAP measures used in this press release are included in the tables attached to this press release, to the extent available without unreasonable effort. Because GAAP financial measures on a forward-looking basis are not accessible, and reconciling information is not available without unreasonable effort, we have not provided reconciliations for forward-looking non-GAAP measures.

A reconciliation of Adjusted net (loss) income and Adjusted EBITDA to the most directly comparable GAAP measure in accordance with SEC Regulation G follows, with amounts in thousands: